BIRMINGHAM, Alabama -- Like many victims whose houses suffered tornado damage, Linda Coleman was confused, flustered and about to give up trying to find out if she qualified for government aid to repair or rebuild.

But the state senator, whose district includes some of Birmingham's most tornado-stricken neighborhoods, kept pushing through the bureaucratic process until she hit paydirt: A $60,000 loan with a 2.56 percent interest rate to repair her damaged Smithfield Estates house.

Over 30 years, payments will be about $270 a month, she said.

Coleman's personal encounter with the federal government has spurred her to urge other victims to stay with the process -- even though she believes it is a complicated path.

"It's been slow and a real learning process, but it's a matter of sticking to it," Coleman said.

Only 4,200 of 43,000 distributed Small Business Administration loan applications have been returned, prompting the federal government to extend the application deadline from this past Monday to July 18. That's also the new deadline to file for a grant from the Federal Emergency Management Agency.

Processes linked

While 84,000 people have applied for FEMA grants, SBA's low-interest loans have been a hard sell.

There are several reasons for the tepid response: The process is confusing; victims are awaiting word from insurance companies about how much they'll get; and victims don't want to take out a loan.

What most victims don't understand, emergency management officials acknowledge, is how the FEMA and SBA applications are linked. Failing to apply for an SBA loan, even if a victim feels sure he doesn't qualify, may leave the victim out of luck for a FEMA grant. And applying for an SBA loan may give a victim access to a FEMA grant even if he has already received an "ineligibility" letter from FEMA.

Confusing? Coleman thinks so.

Like more than 28,000 Alabamians who applied to FEMA, Coleman received a letter from FEMA telling her she was ineligible due to having private insurance. FEMA will grant money -- up to $30,200 -- for uninsured property damage. FEMA also will pay the difference if a victim's insurance settlement is below damage costs.

When Coleman got the letter, her insurance company hadn't even been to her house, much less given her an indication of how much it would pay for damages.

"Like most people, I put the letter in a pile," she said. "It said I wasn't eligible, and that's the same thing in my community as being denied."

Later, she said, she read the letter all the way through and found that she could appeal. She also looked at the SBA packet that had been sent to her as a result of her FEMA application. The turning point came when she talked to an SBA representative walking through her neighborhood, encouraging people to apply for low-interest SBA loans of up to $200,000 for homeowners.

She applied, and said she has had a pleasant experience with the SBA.

Along the way, she learned that for some people, the SBA application can lead to a re-examination of eligibility for a FEMA grant.

She said she knew a lot of people who didn't want to take on a loan, and she believes they probably didn't understand that they might miss out on FEMA grant money if they don't apply to the SBA.

SBA spokesman Richard Daigle said an SBA application can be a "gateway" to a grant.

"If we are unable to approve a person for a loan, they are automatically referred back to FEMA," he said.

In deciding whether to approve a loan, the SBA looks at a person's ability to pay using a complex formula involving income guidelines and credit history.

Not getting approved "is not the end of the road," Daigle said. "It is the end of the road if you don't return the SBA application."

The SBA has so far approved 933 loan applications for $52 million. This includes loans not only to individuals for houses, but also to businesses, churches and nonprofits, which can receive up to $2 million. Renters can receive up to a $40,000 loan for personal belongings damaged by the tornadoes.

Loan concerns

Dave Waldon, who is living in his storm-damaged house with partial power and a tarp on the roof in Concord, said he doesn't know of anyone who has applied for an SBA loan. And he's in the middle of several blocks of major destruction.

"People don't have money, they don't want to take out a loan," Waldon said. "They get a check once a month and have to decide on paying bills and buying groceries."

With the new deadline extension, though, he might now consider an SBA loan as a backup plan. He got a check from his insurance company, but he said it's not nearly enough to repair his house.

Waldon's situation is the kind of scenario SBA officials point to as a reason to apply.

"You don't have to take the loan," Daigle said. "But don't be caught after the deadline realizing that you need one."

If insurance money comes in after the loan is given, the insurance money can pay down the loan.

Coleman said she's working to get the message out about the value of applying to the SBA. She has gone on radio to urge people to sign up. And she's urging churches in tornado-damaged areas to hold "Sunday Signups" for SBA loans.

"There's three Sundays left to the deadline," Coleman said. "I'm afraid there are going to be a lot of people with a cleared vacant lot and no way to rebuild."